Agency treatment of VAT on expense claim

[achillea]

I contract through a well known agency. They provide me with online statements for my weekly services (day rate x no of days) but do not provide me with any statements regarding reimbursement of expenses.

I submit an expense claim for the actual amount paid (which may already include VAT eg on hotel bills). The agency then add VAT onto everything (effectivelly adding VAT ontop of VAT). They then combine any services payments (there are 2 of us invoicing) with expense claims which means I have to try and figure out the breakdown so that I can correctly complete my quarterly VAT return. I have had to create a spreadsheet which works out what VAT I think they will add on but it never ties up with what they pay me.

I have raised the issue that they shouldn't be adding VAT onto items which already include VAT but they insist this is the correct treatment. I'm now totally confused as to what are the net expense and VAT figures to use as it seems that I'm receiving extra VAT which I then keep... very worried that taxman will come calling... even though I just want to do the right thing!

Is this a common issue with agencies? All I want is a vat statement for expenses which they say is not their responsibility to provide!

cheers
A

[JonSmile]

well my equally well known large agency did the opposite

I invoiced everything plus VAT and they refusled to pay until I knocked the VAT off.

[TheFaQQer]

You bill them for time plus expenses (e.g.£900 time, £100 expenses) plus VAT.

They pay the invoice for £1000+VAT = £1175.00

When you do your VAT return, you put down the £1175 as income including VAT and pay over the VAT as necessary.

Your company reimburses the incurred expenses to you as necessary, or puts them down as company expenses.

Simples.

[malvolio]

If you supply a service you have to add VAT to the total cost, i.e. the money that has left YourCo's bank account. How that is made up makes no difference.

VAT on VAT if fine, and is a bit of a myth anyway. Do the sums end-to-end and you 'll see it all balances out.

AS far as your books are concerned, you add up any VAT you have paid out, deduct from that from VAT you have charged and send the balance to Hector. Where's the confusion?

[lje]

Your agency are actually doing exactly the right thing. You should charge VAT on top of your expenses - even if they contain VAT already. Strange but true.

[TheCyclingProgrammer]

Your agency are actually doing exactly the right thing. You should charge VAT on top of your expenses - even if they contain VAT already. Strange but true.

Not really that strange if you think about it as two different things entirely: the original expense, and the re-billing of that expense which, as an entirely contractual arrangement between your co. and the client/agency represents part of your service, ergo:

Original expense: £10+VAT, total cost £11.75, total input VAT £1.75.

Service charge to agency/client (re-billed expense in full): £11.75+VAT, total cost £13.81, total output VAT £2.06.

End result: after removing the output VAT from the remitted amount from the agency, you're left with your £11.75 which means you've recovered your original expense in full. As an additional bonus, because you also claim the original input VAT, you've actually made a whopping 31p profit on the transaction.

Of course the key thing here is what the agreement is between you and the client. If they've agreed to reimburse you *in full* then that should include any VAT element of the original expense.

However, some agencies try and get out of this and insist you remove the original input VAT from the gross amount you are billing them. What they're in effect doing is asking for a discount to the value of the original input VAT.

Don't let them get away with it. In full means in full. Don't let them give you baloney about VAT on top of VAT. You aren't. You'r adding VAT to your service charge which just so happens to equal the net expense value. The fact that you can claim back the VAT on your original expense through your VAT bill is irrelevant.

Further to the above, if you are on the flat-rate scheme, be even more insistent because as you cannot reclaim the original input VAT on the expense, not re-billing at the full net value will mean you are actually out of pocket.

[Olly]

Your agency are actually doing exactly the right thing. You should charge VAT on top of your expenses - even if they contain VAT already. Strange but true.

ooooooooopss
I've always reclaimed expenses from the agency without adding another layer of VAT...bugger could have got a copule of % out of the deal

whoooooooo kneeeeeeew?

Cheers for pointing that one out to me accountants that I pay good money for.....arrrrrgh!!!

[diesel]

my last agency/client always used to do this as correct i.e. original expense total +VAT was invoiced as is usual.


However, current client has preferred to pay contract staff direct to personal accounts rather than billed to LTd Co. I questioned this with agent, and they said they have contract staff thro same client who get expenses either direct to personal account or via Ltd company thro invoice.

I prefer the latter arrangement (i.e. expense +VAT invoiced) so i guess client is trying to avoid paying the VAT? How can i get client to adhere to this for my expenses as i need to do some business trip with client soon.